Divorces, Community Property and Patents — the Problem of the Ex-Spouse

Many universities have standard patent assignment agreements that assign inventions of a university employee to the university. But what if the inventor is married? Or, what if the inventor marries during his or her employment and the invention is created during the marriage? Does the spouse have rights to the invention?

Parties to patent infringement actions are starting to raise this often overlooked issue as a defense in patent cases, including a recent district court case in Florida that is based on a Federal Circuit decision. The Federal Circuit’s decision in Enovsys LLC v. Nextel Communications, Inc., et al., 614 F.3d 1333 (Fed. Cir. 2010).provided the first wake up call for those who have ignored spousal rights in drafting assignment agreements.

In Enovsys, the issue was whether a spouse of an inventor had rights–because of community property laws–to the inventor’s patent. California law provides that a spouse is entitled to an equal share of community property – that is, property that the spouses create during their marriage. Community property obviously applies to real and personal property, but California’s community property laws also apply to intellectual property that is created during marriage.

This legal principle recently played out in the Enovsys patent infringement case before the Federal Circuit. In Enovsys, a co-inventor (Mr. Fomukong) of two patents (claiming to cover systems for disclosing a mobile device’s location only to authorized requests) filed patent applications while married in California. The couple filed for divorce in 2001 in California. At the time of the filing of the divorce papers, one of the patents had already issued from the PTO; the other patent issued in 2002, after the divorce was concluded.

After the divorce was concluded, Mr. Fomukong (along with his co-inventor of the two patents) formed Enovsys, to which ownership of the patents was assigned. Enovsys then filed a patent infringement suit against Sprint.

During the case, Sprint moved to dismiss for lack of standing, claiming that Mr. Fumokong’s ex-wife held an interest in the patent because of California law. Prior to making its motion, Sprint had obtained from Mr Fumokong’s ex-wife any interest that she had in the patent. From Sprint’s standpoint, this would bar Enovys from enforcing the patent against Sprint as Enovys would not have joined all owners of the patent in the lawsuit and Sprint would have its own rights to the patent.

The district court disagreed but only because of the nature of the divorce proceedings. The district court found the divorce proceedings confirmed that Mr. Fumokong held the interest in the patents because his wife had not listed the patents on the summary dissolution form that the parties used to complete their divorce. After a jury found that Sprint infringed the patents, Sprint appealed.

The Federal Circuit affirmed the district court’s ruling. In determining the issue of patent ownership and standing to sue, the Court analyzed the papers that were filed by Mr. Fumokong and his ex-wife to conclude the divorce. In analyzing these papers, the Federal Circuit noted that the divorce occurred through a summary dissolution in which parties must either affirm that they have no community property or sign a property settlement agreement listing all community assets. The Federal Circuit also noted that Mr. Fomukong and his ex-wife both checked the box on the petition stating they had no community property and no property settlement agreement was attached.

To support its position, Sprint argued that because the divorce decree did not expressly adjudicate community property rights, the ex-wife maintained her ownership interest in the patents. Enovsys argued the opposite position, explaining that the summary dissolution papers demonstrated that Mr. Fumokong’s ex-wife had not claimed a community property interest in the patents. The Federal Circuit agreed with Enovsys and concluded that the presumption that the patents were community property was overcome by the summary dissolution proceeding stating there was no community property. The Court reasoned that the summary dissolution proceeding conferred ownership on Mr. Fumokong and not his ex-wife as a result of the checked box stating that they had no community property. Therefore, Enovsys had ownership and standing to sue.

But what if the facts were different and the ex-spouse retained rights to the invention? This factual pattern played out in a recent case in district court in Florida.

James R. Taylor (“Taylor”) filed a patent infringement action against Taylor Made Inc. (“Taylor Made”). Taylor Made filed a motion to dismiss the action on the ground that Taylor did not have standing to maintain the patent infringement action because Taylor’s ex-wife had not been made a party to the lawsuit and she had an ownership interest in the asserted patent.

As explained by the district court, “[t]he Plaintiff and Ms. Taylor were married on February 14, 1987. The Plaintiff subsequently obtained the Patent on September 15, 1998 for a storm drainage conduit plug and sealing band. The Plaintiff and Ms. Taylor obtained a Final Judgment of Dissolution of Marriage (A “Divorce Settlement”) from a Florida state court on March 7, 2011. See also In re the Marriage of James R. Taylor and Mary Louisa Taylor, Case No. 2006-Dr-10057-NC. The Divorce settlement subjects the Taylors’ marital assets to equitable distribution, in so doing notes that the primary assets of the marriage are three United States patents, specifically: (1) ’5,224,514/July 6, 1993;” (2) “5,316,045/May 31, 1994;” and (3)[5], 806566/September 15, 1998.”

The complaint was filed on April 9, 2012. After the complaint was filed, “Ms. Taylor did not join the Plaintiff’s infringement suit, but instead filed a Motion for Contempt and Motion for Injunctive Relief in Florida state court alleging that the Plaintiff had violated the Divorce Settlement by filing the Complaint with the Court.”

After that filing, Taylor Made file a motion to dismiss “[a]rguing that the Plaintiff did not have standing because Ms. Taylor, a co-owner of the patent, had not been made a party to the infringement suit. The plaintiff filed a response on October 29, 2012; arguing that the Divorce Settlement did not grant Ms. Taylor an ownership interest in the Patent, and that even if Ms. Taylor did have an ownership interest in the Patent she had otherwise failed to comply with the terms of the Divorce Settlement.”

Noting that standing is a threshold jurisdictional issue, the district court then analyzed Florida law regarding the ownership of patents. “Under Florida law, properties acquired during a marriage are presumably marital assets. Fla. Stat § 61.075(6)(1)(1)(2012). Further, under Florida law “a patent is personal property that may be the subject of equitable distribution when the inventor and his or her spouse dissolve their marriage.” Gulbrandsen v. Gulbrandsen, 22 So.3d 640, 644 (Fla. Dist. Ct. App. 2009). Additionally, the Florida Supreme Court has definitively held that ‘a final judgment of dissolution settles all such matters as between the spouses…and acts as a bar to any action thereafter to determine such rights and obligations.’ Davis v. Dieujuste, 496 So.2d 806, 809-10 (Fla. 1986). Accordingly, since the Patent was issued to the Plaintiff while he was married to Ms. Taylor, the Patent was presumably a marital asset, under Florida law, prior to the issuance of the Divorce Settlement. The Divorce Settlement merely reinforced that presumption by subjecting the Patent to equitable distribution and awarding Ms. Taylor a 60% interest in any proceeds from the Patent.”

The district court concluded that dismissal was “[a]lso proper based on the analytical framework provided by the Federal Circuit in Enovsys LLC v. Nextel Communications, Inc, which examines ‘the effect of a state-court divorce decree on patent owner’s standing to sue’ for infringement . 614 F.3d at 1335-36. In that case, the Federal Circuit deferred to state law to determine whether a former spouse had legal title to a patent invented by her ex-husband. Id. at 1342. In so doing, the Federal Circuit examined the couple’s divorce settlement, which unambiguously stated that the couple had ‘no community assets or liabilities.’ Id. The Federal Circuit noted that notwithstanding the presumption that property acquired during the marriage was community property, the divorce settlement was entitled to res judicata effect under California law, as well as full faith and credit in federal court regarding the divorced couple’s respective ownership interests in the patent. Id. at 1342-43. Since the divorce settlement expressly disclaimed the ex-wife’s ownership interest in the underlying patent, the Federal Circuit refused to dismiss the plaintiff’s infringement action for lack of standing because she was not a co-owner of the underlying patent. Id. at 1343-44.”

Using this framework, the district court found that dismissal was also appropriate. “In the matter at hand, the Court adopts the analytical framework used by the Federal Circuit in Enovsys. Accordingly, the Court first looks to Florida law to determine whether Ms. Taylor has an ownership interest in the Patent, and notes that under Florida law any property acquired during a marriage is presumably a marital asset. Fla. Stat. § 61.075(6)(1)(a). further, the Court notes that under Florida law a final judgment of dissolution of marriage can subject a patent to equitable distribution among spouses. See e.g., Gulbrandsen, 22 So. 3d at 644. Here, the Patent was obtained while the Plaintiff and Ms. Taylor were married, and the Divorce Settlement confirms Ms. Taylor’s ownership interest in the Patent. Since Ms. Taylor has legal title to the Patent under Florida law, and has not been made a party to the action at hand, the Plaintiff lacks standing to sue for infringement. See, e.g., Enovsys, 614 F.3d at 1343-44; Ethicon 135 F3d at 1467.”

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Together these cases highlight the importance of making sure that spousal rights are addressed in assignment agreement, when acquiring a patent, and particularly before instituting litigation over a patent. Failure to do so can mean that ownership rights are split and result in a lack of standing and, therefore, an inability to enforce the patent, which effectively renders the patent worthless.

Topics:  Community Property, Divorce, Marital Assets, Patents, Separate Property

Published In: Civil Procedure Updates, General Business Updates, Family Law Updates, Intellectual Property Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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